INSTRUCTOR’SSOLUTIONSM . .
ANUAL
for
Microeconomics
Seventeenth Canadian Edition . .
Christopher T.S. Ragan . .
McGill University .
ISBN. 978-0-13-766398-9
Copyright.©.2023.Pearson.Canada.Inc.,.Toronto,.Ontario..All.rights.reserved..This.work.is.protected.by.Canadian.copyright.laws.and.i
s.provided.solely.for.the.use.of.instructors.in.teaching.their.courses.and.assessing.student.learning..Dissemination.or.sale.of.any.part.of.t
his.work.(including.on.the.internet).will.destroy.the.integrity.of.the.work.and.is.not.permitted..The.copyright.holder.grants.permission.t
o.instructors.who.have.adopted.Microeconomics,.by.Christopher.T..S..Ragan,.to.post.this.material.online.only.if.the.use.of.the.website.i
s.restricted.by.access.codes.to.students.in.the.instructor‘s.class.that.is.using.the.textbook.and.provided.the.reproduced.material.bears.thi
s.copyright.notice.
Copyright.©.2023.Pearson.Canada.Inc.
,ii Instructor‘s.Solutions.Manual.for.Ragan,.Microeconomics,.Seventeenth.Canadian.Edition
Contents
Part.One:. What.Is.Economics? 1
Chapter.1:.Economic.Issues.and.Concepts 3
Chapter.2:.Economic.Theories,.Data,.and.Graphs 13
Part.Two:. An.Introduction.to.Demand.and.Supply 26
Chapter.3:.Demand,.Supply,.and.Price 27
Chapter.4:.Elasticity 40
Chapter.5:.Price.Controls.and.Market.Efficiency 54
Part.Three:. Consumers.and.Producers 65
Chapter.6:.Consumer.Behaviour 66
Chapter.7:.Producers.in.the.Short.Run 81
Chapter.8:.Producers.in.the.Long.Run 95
Part.Four:. Market.Structure.and.Efficiency 104
Chapter.9:.Competitive.Markets 105
Chapter.10:.Monopoly,.Cartels,.and.Price.Discrimination 116
Chapter.11:.Imperfect.Competition.and.Strategic.Behaviour 131
Chapter.12:.Economic.Efficiency.and.Public.Policy 140
Part.Five:. Factor.Markets 150
Chapter.13:.How.Factor.Markets.Work 152
Chapter.14:.Labour.Markets.and.Income.Inequality 163
Chapter.15:.Interest.Rates.and.the.Capital.Market 175
Part.Six:. Government.in.the.Market.Economy 183
Chapter.16:.Market.Failures.and.Government.Intervention 185
Chapter.17:.The.Economics.of.Environmental.Protection 198
Chapter.18:.Taxation.and.Public.Expenditure 210
Part.Seven:. Canada.in.the.Global.Economy 219
Chapter.19:.The.Gains.from.International.Trade 220
Chapter.20:.Trade.Policy 229
Copyright.©.2023.Pearson.Canada.Inc.
, Chapter.1:.Economic.Issues.and.Concepts iii
List of Boxes
. .
Applying.Economic.Concepts
1-1.The.High.Opportunity.Cost.of.Your.University.Degree 7
1-2.Economics.Needs.the.Other.Social.Sciences 21
2-1.Where.Economists.Work 30
2-2.Can.Economists.Design.Controlled.Experiments.to.Test.Their.Theories? 34
3-1.Demand.and.Supply.Shocks.Created.by.the.COVID-19.Pandemic 64
3-2.Why.Apples.but.Not.iPhones? 72
4-1.Who.Really.―Pays‖.for.Payroll.Taxes? 93
5-1.Minimum.Wages.and.Unemployment 105
5-2.The.Debate.Over.―Price.Gouging‖:.Efficiency.Versus.Public.Virtue 118
6-1.Rationality.and.Framing.in.Consumer.Behaviour 130
7-1.Is.It.Socially.Responsible.to.Maximize.Profits? 160
7-2.Three.Examples.of.Diminishing.Returns 168
7-3.The.Digital.World:.When.Diminishing.Returns.Disappear.Altogether 174
8-1.The.Significance.of.Productivity.Growth 191
9-1.Why.Small.Firms.Are.Price.Takers 207
9-2.The.Parable.of.the.Seaside.Inn 217
10-1.Network.Effects.as.Entry.Barriers 239
12-1.Potential.Mergers.in.the.Canadian.Airline.Industry 302
14-1.The.Rise.of.the.―Gig‖.Economy 356
15-1.Inflation.and.Interest.Rates 380
16-1.The.World‘s.Endangered.Fish 398
16-2.Used.Cars.and.the.Market.for.―Lemons‖ 404
18-1.Using.a.UBI.to.Eliminate.Poverty 466
19-1.Two.Examples.of.Absolute.and.Comparative.Advantage 484
19-2.Comparative.Advantage.and.Global.Supply.Chains 492
20-1.Canadian.Wine:.A.Free-Trade.Success.Story 520
Lessons.from.History
4-1.Economic.Development.and.Income.Elasticities 95
8-1.Jacob.Viner.and.the.Clever.Draftsman 189
9-1.What.Do.Whaling.Ships.and.Oil.Wells.Have.in.Common? 224
10-1.Disruptive.Technologies.and.Creative.Destruction 241
12-1.Are.Amazon.and.Facebook.the.Standard.Oil.of.the.Twenty-First.Century? 300
13-1.David.Ricardo.and.―Economic.Rent‖ 327
20-1.Tariff.Wars.and.the.Stark.Lessons.from.the.Great.Depression 508
Copyright.©.2023.Pearson.Canada.Inc.
, iv Instructor‘s.Solutions.Manual.for.Ragan,.Microeconomics,.Seventeenth.Canadian.Edition
Extensions.in.Theory
3-1.The.Distinction.Between.Stocks.and.Flows 53
11-1.The.Prisoners‘.Dilemma 270
16-1.Arthur.Okun‘s.―Leaky.Bucket‖ 406
18-1.Who.Really.Pays.the.Corporate.Income.Tax? 450
19-1.The.Gains.from.Trade.More.Generally 482
Part One What
. . .
IsEconomics?
.
This.opening.Part.of.the.book.provides.an.introduction.to.economics..The.central.themes.of.Chapter.1.
are.scarcity,.choice,.opportunity.cost,.and.the.self-
organizing.role.of.markets..The.chapter.also.examines.the.gains.from.specialization.and.trade,.the.role.
of.money,.the.effects.of.globalization,.and.ends.with.a.discussion.of.the.various.types.of.economic.syst
ems..Chapter.2.examines.how.economists.build.their.models.and.test.their.theories..It.also.addresses.ce
ntral.methodological.issues,.the.most.important.being.the.idea.that.the.progress.of.economics.(like.all.s
cientific.disciplines).depends.on.relating.our.theories.to.what.we.observe.in.the.world.around.us..Finall
y,.the.chapter.has.an.extensive.section.on.graphing.
***
Chapter.1.opens.with.a.brief.tour.of.some.key.economic.issues.in.Canada.and.other.countries—
.from.rising.protectionism.and.the.dangers.of.climate.change.to.accelerating.technological.change.and.
growing.income.inequality..The.purpose.is.to.whet.the.reader‘s.appetite.for.the.kinds.of.issues.economis
ts.are.thinking.about.today..This.offers.a.natural.segue.to.the.discussion.of.scarcity,.without.which.few.
of.these.issues.would.be.very.interesting..The.chapter.addresses.the.fundamental.concepts.of.scarcity,.
choice,.and.opportunity.cost,.illustrating.these.ideas.with.a.production.possibilities.boundary..(It.is.wo
rth.noting.that.these.concepts.are.relevant.to.all.economies,.whether.they.are.organized.by.central.plan
ning.or.by.free.markets.).We.then.examine.the.complexity.of.modern.market.economies,.examining.th
e.decision.makers,.production,.trade,.money,.and.globalization..Finally,.we.examine.different.types.of
.economic.systems,.including.traditional,.command,.and.free-
market.systems..We.emphasize.that.all.actual.economies.are.mixtures,.containing.elements.of.all.three
.pure.systems.
Chapter.2.provides.a.longer.introduction.to.the.methodological.issues.of.economics.than.is.usually.inc
luded.in.introductory.texts..We.do.this.because.most.students.believe.that.the.scientific.method.is.limited.to.the.
natural.sciences..But.to.fully.appreciate.economics,.they.must.understand.that.its.theories.are.also.open.to.empi
rical.testing.and.that.these.theories.continually.change.as.a.result.of.what.the
Copyright.©.2023.Pearson.Canada.Inc.
ANUAL
for
Microeconomics
Seventeenth Canadian Edition . .
Christopher T.S. Ragan . .
McGill University .
ISBN. 978-0-13-766398-9
Copyright.©.2023.Pearson.Canada.Inc.,.Toronto,.Ontario..All.rights.reserved..This.work.is.protected.by.Canadian.copyright.laws.and.i
s.provided.solely.for.the.use.of.instructors.in.teaching.their.courses.and.assessing.student.learning..Dissemination.or.sale.of.any.part.of.t
his.work.(including.on.the.internet).will.destroy.the.integrity.of.the.work.and.is.not.permitted..The.copyright.holder.grants.permission.t
o.instructors.who.have.adopted.Microeconomics,.by.Christopher.T..S..Ragan,.to.post.this.material.online.only.if.the.use.of.the.website.i
s.restricted.by.access.codes.to.students.in.the.instructor‘s.class.that.is.using.the.textbook.and.provided.the.reproduced.material.bears.thi
s.copyright.notice.
Copyright.©.2023.Pearson.Canada.Inc.
,ii Instructor‘s.Solutions.Manual.for.Ragan,.Microeconomics,.Seventeenth.Canadian.Edition
Contents
Part.One:. What.Is.Economics? 1
Chapter.1:.Economic.Issues.and.Concepts 3
Chapter.2:.Economic.Theories,.Data,.and.Graphs 13
Part.Two:. An.Introduction.to.Demand.and.Supply 26
Chapter.3:.Demand,.Supply,.and.Price 27
Chapter.4:.Elasticity 40
Chapter.5:.Price.Controls.and.Market.Efficiency 54
Part.Three:. Consumers.and.Producers 65
Chapter.6:.Consumer.Behaviour 66
Chapter.7:.Producers.in.the.Short.Run 81
Chapter.8:.Producers.in.the.Long.Run 95
Part.Four:. Market.Structure.and.Efficiency 104
Chapter.9:.Competitive.Markets 105
Chapter.10:.Monopoly,.Cartels,.and.Price.Discrimination 116
Chapter.11:.Imperfect.Competition.and.Strategic.Behaviour 131
Chapter.12:.Economic.Efficiency.and.Public.Policy 140
Part.Five:. Factor.Markets 150
Chapter.13:.How.Factor.Markets.Work 152
Chapter.14:.Labour.Markets.and.Income.Inequality 163
Chapter.15:.Interest.Rates.and.the.Capital.Market 175
Part.Six:. Government.in.the.Market.Economy 183
Chapter.16:.Market.Failures.and.Government.Intervention 185
Chapter.17:.The.Economics.of.Environmental.Protection 198
Chapter.18:.Taxation.and.Public.Expenditure 210
Part.Seven:. Canada.in.the.Global.Economy 219
Chapter.19:.The.Gains.from.International.Trade 220
Chapter.20:.Trade.Policy 229
Copyright.©.2023.Pearson.Canada.Inc.
, Chapter.1:.Economic.Issues.and.Concepts iii
List of Boxes
. .
Applying.Economic.Concepts
1-1.The.High.Opportunity.Cost.of.Your.University.Degree 7
1-2.Economics.Needs.the.Other.Social.Sciences 21
2-1.Where.Economists.Work 30
2-2.Can.Economists.Design.Controlled.Experiments.to.Test.Their.Theories? 34
3-1.Demand.and.Supply.Shocks.Created.by.the.COVID-19.Pandemic 64
3-2.Why.Apples.but.Not.iPhones? 72
4-1.Who.Really.―Pays‖.for.Payroll.Taxes? 93
5-1.Minimum.Wages.and.Unemployment 105
5-2.The.Debate.Over.―Price.Gouging‖:.Efficiency.Versus.Public.Virtue 118
6-1.Rationality.and.Framing.in.Consumer.Behaviour 130
7-1.Is.It.Socially.Responsible.to.Maximize.Profits? 160
7-2.Three.Examples.of.Diminishing.Returns 168
7-3.The.Digital.World:.When.Diminishing.Returns.Disappear.Altogether 174
8-1.The.Significance.of.Productivity.Growth 191
9-1.Why.Small.Firms.Are.Price.Takers 207
9-2.The.Parable.of.the.Seaside.Inn 217
10-1.Network.Effects.as.Entry.Barriers 239
12-1.Potential.Mergers.in.the.Canadian.Airline.Industry 302
14-1.The.Rise.of.the.―Gig‖.Economy 356
15-1.Inflation.and.Interest.Rates 380
16-1.The.World‘s.Endangered.Fish 398
16-2.Used.Cars.and.the.Market.for.―Lemons‖ 404
18-1.Using.a.UBI.to.Eliminate.Poverty 466
19-1.Two.Examples.of.Absolute.and.Comparative.Advantage 484
19-2.Comparative.Advantage.and.Global.Supply.Chains 492
20-1.Canadian.Wine:.A.Free-Trade.Success.Story 520
Lessons.from.History
4-1.Economic.Development.and.Income.Elasticities 95
8-1.Jacob.Viner.and.the.Clever.Draftsman 189
9-1.What.Do.Whaling.Ships.and.Oil.Wells.Have.in.Common? 224
10-1.Disruptive.Technologies.and.Creative.Destruction 241
12-1.Are.Amazon.and.Facebook.the.Standard.Oil.of.the.Twenty-First.Century? 300
13-1.David.Ricardo.and.―Economic.Rent‖ 327
20-1.Tariff.Wars.and.the.Stark.Lessons.from.the.Great.Depression 508
Copyright.©.2023.Pearson.Canada.Inc.
, iv Instructor‘s.Solutions.Manual.for.Ragan,.Microeconomics,.Seventeenth.Canadian.Edition
Extensions.in.Theory
3-1.The.Distinction.Between.Stocks.and.Flows 53
11-1.The.Prisoners‘.Dilemma 270
16-1.Arthur.Okun‘s.―Leaky.Bucket‖ 406
18-1.Who.Really.Pays.the.Corporate.Income.Tax? 450
19-1.The.Gains.from.Trade.More.Generally 482
Part One What
. . .
IsEconomics?
.
This.opening.Part.of.the.book.provides.an.introduction.to.economics..The.central.themes.of.Chapter.1.
are.scarcity,.choice,.opportunity.cost,.and.the.self-
organizing.role.of.markets..The.chapter.also.examines.the.gains.from.specialization.and.trade,.the.role.
of.money,.the.effects.of.globalization,.and.ends.with.a.discussion.of.the.various.types.of.economic.syst
ems..Chapter.2.examines.how.economists.build.their.models.and.test.their.theories..It.also.addresses.ce
ntral.methodological.issues,.the.most.important.being.the.idea.that.the.progress.of.economics.(like.all.s
cientific.disciplines).depends.on.relating.our.theories.to.what.we.observe.in.the.world.around.us..Finall
y,.the.chapter.has.an.extensive.section.on.graphing.
***
Chapter.1.opens.with.a.brief.tour.of.some.key.economic.issues.in.Canada.and.other.countries—
.from.rising.protectionism.and.the.dangers.of.climate.change.to.accelerating.technological.change.and.
growing.income.inequality..The.purpose.is.to.whet.the.reader‘s.appetite.for.the.kinds.of.issues.economis
ts.are.thinking.about.today..This.offers.a.natural.segue.to.the.discussion.of.scarcity,.without.which.few.
of.these.issues.would.be.very.interesting..The.chapter.addresses.the.fundamental.concepts.of.scarcity,.
choice,.and.opportunity.cost,.illustrating.these.ideas.with.a.production.possibilities.boundary..(It.is.wo
rth.noting.that.these.concepts.are.relevant.to.all.economies,.whether.they.are.organized.by.central.plan
ning.or.by.free.markets.).We.then.examine.the.complexity.of.modern.market.economies,.examining.th
e.decision.makers,.production,.trade,.money,.and.globalization..Finally,.we.examine.different.types.of
.economic.systems,.including.traditional,.command,.and.free-
market.systems..We.emphasize.that.all.actual.economies.are.mixtures,.containing.elements.of.all.three
.pure.systems.
Chapter.2.provides.a.longer.introduction.to.the.methodological.issues.of.economics.than.is.usually.inc
luded.in.introductory.texts..We.do.this.because.most.students.believe.that.the.scientific.method.is.limited.to.the.
natural.sciences..But.to.fully.appreciate.economics,.they.must.understand.that.its.theories.are.also.open.to.empi
rical.testing.and.that.these.theories.continually.change.as.a.result.of.what.the
Copyright.©.2023.Pearson.Canada.Inc.
